Internet Savvy South of the Border

San Diego  A year ago, Tijuana's daily papers, Frontera and El Mexicano, reported that Internet cafés were proliferating throughout Northern Baja in response to growing demand for Internet access. The stories predicted that the number of Internet cafés would continue to grow for the foreseeable future. By all accounts, the number did grow, though in Tijuana nobody seems to know how much. Repeated attempts to get a hard number or an estimate from trade organizations and individuals produced only the answer "No se" (I don't know) and unfulfilled promises to find out and call back. But if Ensenada may be used as a microcosmic example of all Baja, the number of Internet cafés has gone up over 800 percent in the past half decade. "We've got over 250 Internet cafés in the municipality of Ensenada," says Luis Antonio Palomino Dagdug, whose computer-services company, Data Red, operates 6 Ensenada cafés internet, as they are known in Mexico. "Most of those opened in the last two years, and five years ago we only had maybe 30 in Ensenada."

But Palomino believes that after two years of explosive growth, the Internet café business in Baja is going to slow down and many cafés are going to start closing. "The majority of the Internet cafés, of the over 250 that there are here, we estimate that better than 60 percent are illegally established. Currently, the municipal government is legalizing all these businesses. This is done by visiting them and checking to see if they have all the documents. In 2007, they're requiring that to establish an Internet café business, the place where it's going to be installed must fulfill all of the municipal requirements, like usage of the floor, fire permits. This is a new program that just started this year in Ensenada. Ensenada is the first municipality in Baja to set up rules in order to get money -- taxes -- from all of these businesses."

Seated in a cramped office at one end of the Data Red store about three miles southeast of the Ensenada waterfront, 39-year-old Palomino wears a gold dress shirt, no tie, over a pair of olive green dress slacks. Alternating between English and Spanish, he opines that most of the illegal cafés won't survive the legalization process because the cash outlay required to bring a business up to legal standards will be more than they have. "Most of them were started without a lot of money to begin with," he explains. "The price of computers went down, so it seemed easy to buy ten computers, set them up, and start collecting money. But most of them don't understand just how many customers you need in a day to make an Internet café business very good. If you have ten computers -- and that is the average number of computers in the Internet cafés -- you need to know how many customers you need to pay the electrical bill, pay the rent, the phone, the new government tax. So many people started in the business, and now many people are closing their businesses. And we project that most of the 250 Internet cafés are going to close in the next two years."

Data Red's Internet cafés won't be among those closing, Palomino believes, because he offers more than just Internet connections in his six cafés. "The profit is in the additional items that you can sell to the people. For example, in all of our Internet cafés, we sell computer accessories that people need. Look here," he points to a monitor on a shelf near his desk. The screen is broken into six panels, each showing a live feed from security cameras in his cafés. "You can see my Internet café at the El Cortéz Hotel. We've got three people at the computers, and behind the counter you can see the accessories that are for sale."

Up a flight of exterior stairs, above the Data Red store, is the company's flagship Internet café -- 40 computers spread out through three rooms. Fifteen of them have flat-screen monitors, "and they are better computers," Palomino says. "We charge 30 pesos [a little over $3] for as many hours as you want on the regular computers, 50 pesos if you want to use the flat screens [a little over $5]."

It's about two in the afternoon, and only 2 of the 40 computers are in use. Asked if he can make a profit on Internet-connection rentals, Palomino answers, "No, but it's only part of our business. Later in the afternoon, we'll have computer classes in the flat-screen room to teach Windows, Excel, Word, and other software to professionals. While that's going on, the teenagers will start coming into the other areas to do chatting and gaming. From seven to ten, a lot of kids will be in here chatting and gaming. And sometimes on weekends, kids are at all 40 computers."

Combining the classes, the Internet-connection rental, the computer-accessory sales, and the computer service business, Data Red makes a profit, Palomino says. That kind of diversification is the key to a successful Internet café, says Wayne Neal, general manager of Club LAN in the Midway District, one of only two places produced by a Google search for "San Diego Internet café." "We have several aspects to our business that make us successful," Neal explains. "We're an Internet café and gaming center. We have 30 Internet connections" -- for ten cents a minute, or six dollars an hour -- "but our gaming computers are what brings in most of our customers. I think they come for the gaming atmosphere, instead of playing at home. And we have dual-core processors and high-end video cards on our computers that they might not have on their home computers. They allow us to run games on the highest graphic settings."

Neal says computer cafés have failed in San Diego because they were focused solely on renting Internet "or on gaming, and sometimes only one game. For example, I know of one center up in Mira Mesa that depended on people playing one game. They didn't have any people playing other games, and they didn't have any Internet access. And they went under. But we have people playing World of Warcraft, Counter-Strike, Battlefield, pretty much anything you want to play. In fact, we have a professional Battlefield team that plays here."